Some Loan Definitions

1.    Loan / Advance. This is an amount lent by a Lender to a Borrower to meet a financial gap. Loan Eligibility indicates how much loan one can get.

2.   Regular Housing Loans. Banks and Group Insurance Funds generally give loans to eligible borrowers.

3.   Margin Money. The borrower must make a down payment of 15% of the cost of property before loan is sanctioned. This is known as Margin Money.

4.   Gross Pay / Net Pay. Basic Pay + DA + Rank Pay + Military Service Pay is known as Gross Pay. Gross Pay minus deductions such as Provident Fund, AGIF contribution and repayment of other loans (like car loan, computer loan, etc) is Net Pay.

5.   Margin Money Gap. When the borrower does not have Margin Money, the difference between Liquid Cash held and mandated 15% is called Margin Money Gap.

6.   Funding Gap. When the cost of property is more than the amount of liquid cash + loan eligibility, the difference is known as Funding Gap.

7.   Special Loans. In some special cases, depending upon availability of funds and on special case to case basis, short term Margin Money Gap can be covered through structured Interest Free Loans from our Trust. Funding gap can also be covered on case to case basis by our Trust.

8.   EMI. Short for Equated Monthly Installments. This is the amount to be paid every month as repayment of loan for a fixed number of installments. The EMI comprises of two components; Principal (or Loan Amount) and Interest.

9.   Loan Eligibility. Loans are given by Group Insurance Funds / Banks based on REPAYMENT Capacity of borrower assessed as per their own internal policies and measured as follows:

(a)   Ability to repay the loan every month (EMI) from the salary without impinging on their essential and unavoidable living costs and is defined as an EMI Factor expressed as a percentage of pay.

(b)   Time available to repay the loan; generally based on Age / Retirement Date or both.

10.   EMI Factor. Generally banks assume that a person should be able to pay 45% of net pay for repayment of loan while AGIF considers 75% of net pay as repayment capacity. For example, if you are getting a Net Pay of Rs 1000/-, a bank will give a loan whose EMI is Rs 450/- per month, while if AGIF gives a loan, the EMI will be Rs 750/- per month. Thus for a 20 year term at 10% Rate of Interest, a bank will give a loan of Rs 46,631/- while AGIF will give a higher loan of Rs 77,718/- to the same person.